Personal finance: Winning ways to save (Part 2)

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March 31, 2010

By Jason PriceGuest blogger

In Part 1 we discussed having a good defensive game plan for your finances to watch out for expenses and unexpected threats to your financial stability. To recap, I discussed budgeting for contingencies, holding regular family meetings about finances, devoting time each day to review your spending, talking to creditors and using % guidelines for planning and to help control spending.

So, here in part 2, I’m going to continue with some more tips and strategies to help you in everyday personal finance.

Budget with a freedom account

I first learned about the freedom account through a Crown Financial ministries small group financial study my wife and I took at our church. It was originally created by Mary Hunt has become an additional budget category for our monthly spending plan.

In short, the freedom account holds all of those spending categories that come up only once or a few times per year. Essentially, it’s another savings account which we have with an online high yield bank. First, determine which expenses need to be included in the freedom account. Here are some examples: home taxes, home insurance, HOA dues, birthdays, vacations, etc. Then, divide the total estimated for each expense by 12 months and deposit that amount into your freedom account each paycheck. When an expense is about to occur, withdraw the money from the freedom account to cover it.

The beauty of the freedom account is you’re never surprised when one of these expenses shows up. Your freedom account provides you freedom from using a credit card to cover the expense.

Have a realistic budget for entertainment and recreation

According to Crown Financial Ministries, vacations and eating out are the primary sources of credit card debt accumulation. Therefore, it’s reasonable to suggest these two areas are the biggest budget busters! Because of these reasons, you need to have a strategy to have fun, but not too much fun. In other words, you don’t want to deprive yourself of a little fun each month, but at the same time, you need to control spending in these areas, otherwise, you’re going to rob money from other budget categories and financial goals. What’s the best way to manage this area? If you’re used to managing your money electronically and tend to overspend here, try managing entertainment and recreation with cash. When it’s gone, it’s gone. With this approach, you have to wait until the next month to have more fun! J

Identify your personal finance team

People often don’t think about seeing a counselor or a financial coach until they have problems. Sure, a financial advisor is often met with to discuss financial planning for investing, retiring, insurance, etc. But how often do people meet with a Christian budget counselor who can provide a Godly view of the money management for the family as well as provide further Biblical financial guidance. I recommend adding this person to your personal finance team and meet with them at a minimum once per year.

Also, make sure you have all the right people available to assist you. Have you identified a lawyer who specializes in wills and trusts? How about a financial advisor who you can speak to about investments and retirement? Or, what about a tax professional you can go to for advice or help in preparing your taxes? Make sure your personal finance team is identified to help provide you the tools and resources you need in these areas.

Create a want list

A spending defensive strategy worth considering is a creating a want list. This is a list for the things you want but cannot have today because you don’t have the money to purchase them. Why is it important to have a want list? Well, in my view, a want list is a priority list and a plan. If you do come across extra money, perhaps with a work bonus, you can immediately go to the want list (beyond saving, paying off debt, etc.) and pick the first item you can afford. Having a want list helps in communicating about money between couples, but is also a good defensive strategy for singles too!

Safety deposit box

Wrapping up our defensive strategies, I want to talk about something you can do to help plan for the future and maintain financial stability should something happen to the family CFO or money manager in the family. I wrote a post last year at Bible Money Matters about preparing a safety deposit box that should include important financial information for your family. I think it’s an important tip, so I’ll mention it here among our defensive strategies.

Your safety deposit box should contain the keys to your financial life which might include the following: wills and other legal documents, passports, financial information sheet, etc. The financial information sheet should include account information, special instructions, and other information. In other words, you should provide all the information your spouse might need to continue to maintain the family finances. Losing a loved one is difficult enough, but having to assume the responsibilities of family CFO and try to determine where everything is located and how to manage the money is even more difficult.

Final thoughts

Well, I hope you’ve enjoyed the defensive financial strategies mini-series and the tips have enhanced your financial tool belt. Often we think of our responsibilities as financial stewards being limited to budgeting, tithing and controlling spending. But as you can see from all of these strategies and tips, the responsibilities of good stewards are much more deeply involved in order to bring a good defense to the game.

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